Full Interview Transcript

Andrew: Hey there, freedom fighters. My name is Andrew Warner. I am the founder of Mixergy.com, home of the ambitious upstart. I’ve done over 1,000 interviews. And you know, one thing that I’ve heard over and over again as I’ve done these interviews, is start with the smallest, most simple version of your idea possible.

Today’s guest is smiling as I’m saying this. And the reason he’s smiling is, he went way smaller than most people would even imagine. He created a multi-million dollar company, but started it by selling just an Excel spreadsheet. Not Excel, not a spreadsheet, just like a spreadsheet he created on Excel. And today he’s got a really successful, thriving company that I invited him here to talk about. His name is Jesse Mecham. He is the founder of You Need A Budget, or YNAB for short. It’s software that helps people create budgets.

This interview is sponsored by Scott Edward Walker of Walker Corporate Law. In a moment I’ll tell you why he is the guy to go to if your are an entrepreneur, and you need a lawyer who really gets the startup space. But first I’ve got to welcome Jesse. Welcome. Thanks for doing this interview.

Jesse: Hey, I appreciate it. I’m happy to be here.

Andrew: The Excel spreadsheet was, you basically opened up Excel, the Microsoft Office software, and you created a spreadsheet where people can fill in the boxes.

Jesse: Fill in the boxes. Exactly right. I didn’t create it for people, I created it for myself. But then about a year into using it, I thought well, maybe other people could use this as well.

Andrew: And you created it for yourself because at the time, you were broke.

Jesse: Absolutely. Well, I was just about to be married.

Andrew: How? I mean, we’ve heard Hillary Clinton say, and I don’t want to get into politics. But Hillary Clinton says she and the President left the White House broke. And then people said, “Yeah, broke. Except for these multi-million dollar houses.” So, how broke were you?

Jesse: We could have fared well living in a suitcase. I was just about to be married. I was down in the library. I remember distinctly using their computers because those were free. I was using Excel, kind of learning how it all worked at the time. I was just kind of combining mine and my wife’s finances together. We were going to be married a few months later. She was making eight or nine bucks an hour. I was making $10.50 an hour, and we had a lot of school left. So, we didn’t have big prospects right away. We were definitely broke.

Andrew: I see. So you were just saying, “Here’s how much money we can expect to get in, month-to-month. Here’s where our expenses are.” What was your biggest expense at the time?

Jesse: Oh, rent.

Andrew: Rent.

Jesse: Books, maybe.

Andrew: Okay.

Jesse: Maybe textbooks.

Andrew: Okay.

Jesse: Between those two.

Andrew: So you take your salaries, you subtract your rent and your textbooks and a couple of other expenses. And you see, are we going to make it this month? And based on that, you adjust your spending.

All right. And that’s what you sold. But before we get into how you sold this, because frankly, I think most people are going to blow past that. But secretly, they know that they don’t have the nerve to sell anything that simple which is why they often won’t launch anything. They over-complicate it.

But let’s get to know you before we get to know how you launched this product. You’re a guy who had hustle in him. I mean, as a sixth-grader, you went calling. You’re smiling. You know what I’m talking about. You’d call companies for what?

Jesse: Yeah. Well, I was into roller-blading at the time. We called it aggressive inline skating. It’s old now. It was new back then. And I was in sixth grade, had no money for gear or wheels and bearings. You know, we were so concerned about those. So I thought, man, one way I could get some gear is by throwing a competition, and then having these sponsors come, like Boss Bearings and Hyper Wheels. They were these big companies back then.

I wrote letters to those two companies, and I kind of, I bent the truth. I said I was part of the Arizona Inline Skating Association, which had one member apparently, and that was me. But I sent out the letters. I didn’t hear anything back for a long time. And then one day I get a phone call, and my mom says, “Jesse, the phone’s for you.”

And I answer it in my sixth-grade voice. And this guy says, “Hey, I’m from Hyper Wheels. You’re throwing this competition.” So suddenly I remembered. Oh my gosh, I sent those letters. So I really made it official. I wanted to actually throw the competition.

We ended up having a ton of kids there. We didn’t ask permission to use the school parking lot. We had all sorts of liability things that we should have cared about, but I didn’t know that you needed to, so that was a plus. Yeah, we launched that competition. It was a lot of fun and I got some free product out of it.

Andrew: The thing I take away from this is that you learned a lesson that we should all learn, which is, you just have to ask. The worst thing that could have happened was they could have said no.

It’s easy of course to say, “Look, you might as well ask because the worst you’re going to get is no.” It’s harder when you’re facing someone to ask for something, even though you know you’re not going to die if they say no.

What I like about the way you did it is, you did it over the phone. So you didn’t have to stare them down. You didn’t even have to look at them. You could just say, ‘Hey, could I have some free gear?’ And maybe you could hold the mike on your phone and just get nervous and wait for them to respond.

Jesse: Yeah. It worked out really well. It was kind of pivotal for me. I realized, you know, you could kind of throw things together. We put out flyers. We spread the word. It was something that the kids all around us wanted. It was a big deal to me at the time.

Andrew: And then you were in school. You got a job at an accounting firm. Did the job come after you and your wife initially created the budget?

Jesse: Yeah.

Andrew: Or was it before? It was after. So, you created a budget. You were getting yourself on the right track. You got yourself a job, you work nonstop. You come home from work; watch 24 with your wife.

Jesse: Yeah.

Andrew: And your surprise her with a treat. What’s the treat?

Jesse: The treat was, well, we had to order dinner out because I was staying so late. We’re working this big company. We were doing auditing for them. And they would sell dinner, you know, working late. They would say, “Hey, we’re going to provide dinner. We’ll go to Outback” or whatever.

And I had two little kids at the time. I mean, dinner to me was like nails in the coffin. I would have rather starved and gone home. They sold it that way. So they said you get free dinner, and we’d go out and pick it up. And then I’d come home about 10:00 or 10:30 and my wife would probably be asleep. So, I decided I would liven up the evening with my wife, and I would just order dessert when we ordered dinner, and then take it home with me. Then we would share it. You know, it’s like a $7.00 pricey dessert.

So we did that. We would eat it, we’d watch 24. It’s really healthy to eat right before you go to bed. Everybody knows that. So that’s what we would do. And it was a nice time for the two of us, for just a moment in time to be able to kind of connect and hang out for a second. And then 6:00 AM might be, well, earlier than that I’d be hitting it again. So, that was kind of our reprieve, so to speak.

Andrew: Meanwhile though, you heard through the grapevine that your manager thought what of all this?

Jesse: Yeah. It was the partner on the job. Yeah. Just kind of heard that he didn’t care for me charging that $7.00 dessert on the books of the job. This was a massive job. It would never have registered a blip.

So two things kind of bugged me about it. One was the immateriality, to use one of his auditing terms. But also the fact that he didn’t come to me face- to-face and say hey, I have a problem with you ordering this chocolate cake, and bringing it home to your wife. It was a point where I thought, I don’t know if I want to be that guy. And it kind of changed my trajectory.

Andrew: When I think about why people don’t want to get a job, that’s the kind of story that they fear. Working late hours, barely getting any time to spend with their family, and the one treat that they decide they’re going to get from this job, suddenly someone comes down on them for it, or looks at it negatively.

You were building, as I said, a spreadsheet and selling it. The first version of the spreadsheet, where did you sell it?

Jesse: I sold it, well, I launched it all online. It was September of 2004, so I still had about two years of school left. And my target was to make rent. If I could make rent with the spreadsheet, then I could continue my part-time job, get through school. And not have to . . .

Andrew: When you say sell it online, how?

Jesse: I was sitting there at the table, and I asked my wife what should we name the website. And she said, “What about You Need a Budget?” So I bought the domain. It was available. Probably wouldn’t be now, these days.

But yeah, I picked it up, and then I just started learning how to write web pages. I think I threw a PayPal button up there. And that was basically it.

Andrew: I’m looking at the early version of your site. A lot of statistics.

Jesse: Yeah.

Andrew: Consumer debt as of 1999 has grown 73 percent since 1993. Now approximately $1.7 trillion. This doesn’t even count home mortgages.

Jesse: Sure. Yeah.

Andrew: This makes you a little squeamish, when we talked about it before the interview started. You became a great copywriter, and we’ll get to that. This is very basic stuff. How did you even get anyone to come to this site and buy your spreadsheet?

Jesse: Well, I should say what I did first that didn’t work, and then we can talk about what did.

Andrew: Okay. What didn’t work?

Jesse: The first strategy was to canvas my apartment complex with flyers. I had my little baby at the time. He was the whole impetus for launching this massive venture. The baby came, and I wanted to make this money.

So Julie’s with the baby porter, she’s with the stroller, and they’re wheeling around. And I would run up and down the stairs of our apartment complex. It’s a massive complex, right? And I’d stick flyers on everyone’s doors. I don’t know if you were allowed to do that, but I did it. Julie gave up after an hour or so. I did it for a few more hours, and then I came home.

At the time there was a service called Stat Counter. I remember logging into that and then checking to see what kind of traffic I got. I remember seeing one person came and checked it out, but that was the extent of it.

I also remember putting vinyl lettering on the window of my car. And that’s an unknown. Maybe it was wildly successful, because you never know, but I don’t think it drove too many people.

Andrew: I don’t imagine it did.

Jesse: While they’re driving in 2004, we couldn’t even surf the web while driving, so it wouldn’t have worked.

Andrew: And then even today, sometimes I see local businesses where someone will launch a new company, and on the back of their car they’ll have an ad for it. And I’m thinking, how many people are going to actually type that in and need to go and see your business? Probably not that many. But I’m sure in their minds they think, I’m in traffic all the time. There are tons of people around me.

Jesse: Oh, yeah.

Andrew: I must be getting orders from it. All right. So, that didn’t work.

Jesse: No.

Andrew: What did work for you then?

Jesse: So Julie, my wife. I asked her how much money can I use to get this thing going? She gave me a budget of $100. And I used $63 of it for AdWords. And luckily, AdWords back then was much less expensive than it is now. I started putting ads out there. I think I was probably paying 5, 10 cents a click, so it was the good old days. And I started getting traffic. I didn’t make any sales, but I did start getting some traffic, where I could see if it was even viable or not.

Andrew: Wait. You’re telling me this page right here, that says if Americans paid their bills on time, the money saved on interest would equal 100 percent federal income tax for every lower middle class wage earner? That did not get people to click the button?

Jesse: It did not. I mean, it’s so emotionally charged, you know. But for some reason no one identified with it. Yeah. It was awful, just awful.

Andrew: You do remember, though, this is surprising. You remember your first customer.

Jesse: Yeah.

Andrew: You even remember her email address. How did you get her, and why do you remember so much about her?

Jesse: I remembered it because I had to refund all of her money. She was on this computer called a Mac. I didn’t know much about those, and my fancy spreadsheet was just bombing all over for her.

I went to the university. They had Macs in this special area of campus for video editing. I went in there and there were these really sleek machines, and loaded up my spreadsheet, and it just broke all over the place.

We emailed back and forth. I tried to figure out everything. We’d emailed so much. I remembered her email from that. And bless her heart, you know, that she put in a good effort with me. But I did end up having to refund her money, because I had no idea how to fix the problems she was having. That was my first sale.

Andrew: I should say this. I’m laughing at the old copy, but if anyone were to take a look at the current copy and the current design, it looks so polished. If you wanted to show someone how to create a page that represented a company well, this would be it.

Everything from clear navigation, you know exactly where to click to get a 34-day fully-featured demo. I love that little detail. To watching the video, to seeing social proof, satisfied customers, to seeing articles in the news. So, you’ve come a long way.

What was in that first spreadsheet? What did it do? What did it look like?

Jesse: It looked like, I mean, I used every color that Excel had available, so you can imagine how delightful that looked. It was a massive spreadsheet with a lot of scrolling. But the idea was, everything you spent, you would enter. And that’s a sound principle. It was just delivered in a really amateur, kind of ugly way, but the principle was sound.

Andrew: So the first column had a list of categories.

Jesse: Yes.

Andrew: And it might say something like Rent, it might say something like Books, it might say something like Groceries. And you would go and fill in the square next to Rent what your rent is, in the square next to Groceries what you’re paying on groceries. In the cell next to each item you fill it all in. And by the time you’re done, there is a bottom line number that you get.

Jesse: Yeah.

Andrew: That seems pretty simple. But you went a step further and you used macros. I remember when I first discovered them in Excel they were magic for me. But what did the macros do, and what happened when you launched them?

Jesse: Well, classic. Everyone that is maybe listening to this has technical skills that are far greater than mine. There’s a relativity as far as what an MVP is, and I exceeded my MVP and started thinking I had to be fancy. For me, fancy was macros. For a lot of these guys, that’s not fancy at all. But for me, it was kind of a step that direction.

There were far too complicated. I couldn’t troubleshoot them. I didn’t know what they would do on different platforms or different versions of Excel. It was just classic developer issues that would be really easy for a CS 100 kind of guy, but for me it might as well have been rocket science. So I regrouped and took that, and just tore them all out, and said OK, this has to be simpler than what I have, or else I don’t know how to handle it.”

Andrew: I see. And one of the things that I heard from Jeremy Wise’s pre- interview for you that the macros did was that you wanted people to be able to click a button and have a row automatically appear where it should so that they could add more data about car maintenance, etcetera. That made so much sense. I can see why you wanted to pull it out. I do remember that Excel macros didn’t work between computer platforms, Windows to Mac, didn’t work, as you said, between versions. It became a big nightmare. You pulled that out, you kept it even simpler, it was time now to keep getting more customers. Pay-per-click, did it eventually work for you?

Jesse: Yeah, it did. It still works. We pay more for it now, but yeah, it worked, it was enough to prove that there were people who wanted to look past all of the awards and see some value there. So I was grateful to- I didn’t do anything special with it. I’m sure my copy was bad there, I’m sure my quick-through rates could have been optimized, but it did what it was supposed to do for me.

Andrew: Okay. How did you learn how to make it work, or was it just that you got in so early that five cents a click would work for anybody?

Jesse: It was partially that. When you start, the next step is obvious. You’re dealing with a fairly small problem, and I feel even today our next steps are obvious. But looking back you think, “Oh, how did you learn this or that?” But I would see a new opportunity with different types of ads, or I would read somewhere, “Hey, you should maintain context between ad headiness and then headline of the wage, and I would do things like that, but it was just iterating hundreds of thousands of times at this point, just getting to something that was starting to work.

I didn’t do a lot of research before I started, I know a lot of times people consume more than they create, and in the creation process you learn really, really fast. Much more than in the consumption process.

Andrew: I do see some of the ads, that’s what I was looking up right now, some of the ads that you use. “Simple envelope budgeting. Software kicks envelope budgeting into high gear. Instant download,” budget is a keyword that you use. “You need a budget, you buy Microsoft Money.” Buy that keyword I guess competing against them. “Like MS Money but better.”

You really are competing against some big-pocketed people and your software’s so smooth. So clear and easy. Why didn’t you say to yourself, “Hey, you know what? This spreadsheet makes sense. I’m just going to keep it there but I’m not going to compete with [inaudible 00:02:54], I’m not going to compete with Microsoft that has money. Why pursue a business with so much competition?

Jesse: I didn’t even give that a thought. So I didn’t evaluate the field and say, “Man, this is a crowded space! It’s super-crowded! Everyone wants to role one of those out!” If I were ever to do it over again, I would still do it, because I would know exactly what I want to hit, but I realized later on that once it started getting some traction, and I don’t honestly know if we’re even a blip on the likes of [Into It’s] radar or anything like that.

But once I started getting traction, I realized that we didn’t differentiate on features and we never would, but we could differentiate on our message and how we were positioned, and we carved out a really opinionated and dogmatic space in personal finance where we just said, “This is our way!”

Andrew: What’s the opinion that you were hammering from the beginning?

Jesse: I have four rules, and I was dogmatic, still am, about those rules. You give every dollar a job. You save for a rainy day, look ahead, take larger, less frequent expenses and make them monthly amounts. You role with the punches, budgets are supposed to be fluid, and the last one was you live on last month’s income. You know, all of these people on variable incomes that I say, “Well, that’s not even an issue, you just spend money you’ve already earned. Don’t try and forecast.”

So we end up doing a lot more education, 95 percent education, 5 percent software, but it puts us in a spot that, in the consumer’s mind, we compete with [Mint] or Quick-End, but we’re just starkly different from them.

Andrew: You kept creating a spreadsheet, at one point you switched to software, the one that I see now that works on desktop computers, I-Phone, android… when did you take your first step towards creating your own software?

Jesse: It was February of 06, and I’d been selling for about a year and a half, and a guy named Taylor contacted me and said, “Hey, I like your rules that you have, and I could improve the spreadsheet.” We could do, you know, we can connect to banks and make it fancy. And I said, well, honestly, if we were to go out and work with the spreadsheet, I’d rather have [?] software. He was a Microsoft guy, he said he could moonlight and do that, and so we agreed on a project price, and then I had to go home and tell Julie that we were not going to put a down payment on our house, so that was . .

Andrew: Because you were going to use the money to pay the developer instead.

Jesse: Yeah, we were going to do the developments.

Andrew: And how did Julie take it?

Jesse: Very, very well, so, no, she was a trooper, she’s always been a trooper, I’ve had, you know, she’s born and raised small Alabama girl, and keeps things simple, so when you go to her and say, hey, we can’t do the house thing for another couple years that I was promising for the last year, she’d just kind of say, “Okay,” you know, I’ve got these kids so I’m busy, you know, so it was all okay.

Andrew: At what point did you quit your job?

Jesse: That was ’07, middle of ’07. So I graduated in ’06, had almost in that job with the accounting firm, and then in ’07 I jumped ship, did a small bit of consulting because I was genuinely afraid of being on my own, so little bit of consulting with some friends, but then three months after that I was fine, so.

Andrew: You weren’t even sure that you should quit, who did you go to talk to to get advice about whether you should quit or not?

Jesse: My pastor, he, you know, I didn’t really know him that well, we had just moved into the new area few months, well, five, six months before. It’s a big congregation, and I set up an appointment with him, and he doesn’t really know me from anyone, he deals with a lot of young married people, and I remember walking into his office and, he was a really successful businessman and did the pastoring kind of, you wouldn’t say pro bono, but, you know, it wasn’t, it was kind of a layman thing there, and so I go into him, and he’s very somber, like serious, and I imagined after the fact only that he must have been thinking I had some sin to confess.

I was having marital issues, I was being unfaithful or something, you know, and so I go in and I, and he’s, you know, kind of grave, what can I help you with, and I said, his name was, last name was Huntsman, and I said, “You’re a successful business man.” He kind of nods and wonder where I’m going with it, and I said I’ve got this side business, and it’s making about four times what I make with my main job, and I’m working 80 hours a week at this main job, and you can just see his face just kind of completely changed, he was so relieved and so happy.

So suddenly he realized, “Oh, you want to talk about business, this is great.” So he said, quit, what are you doing, you know, quit right away, you have nothing to lose, you have zero risk. So on his urging and with my wife’s blessing, obviously, she was happy to have me quit, I jumped ship, so it was great.

Andrew: How much were you selling the Excel spreadsheet for, that you were able to make four times your salary at a big accounting firm?

Jesse: By the time we were doing 4x the salary, and the salary, to give everyone total context, I think I was making forty-eight, fifty grand a year, so I was doing well, had two little kids, small little apartment, low overhead, right, and the spreadsheet and our software, at that time we’d been selling our stand along software for Windows for probably about five months or so. So at that point, that stand alone software really launched us much further than the spreadsheet can.

Andrew: Gotcha. When you got the spreadsheet alone, how much would, if you could remember, how much money were you making a month off of just selling a spreadsheet template?

Jesse: It was six or seven grand a month from the spreadsheet.

Andrew: Wow.

Jesse: We’re selling it for 20 bucks a pop, and yeah, it still sold, so.

Andrew: You know, I’ve talked to other entrepreneurs who sold, not a spreadsheet, I don’t think, but word docs with fill in the blanks like . . .

Jesse: Yeah.

Andrew: . . . what’s a good one, one is a business plan word doc, where you fill in the blanks, delete what you don’t need, keep the rest, do you think that that still would work today if someone were to create a doc as a basic MVP, minimum viable product?

Jesse: As an MVP, yeah, it’s just awesome testing. You test immediately, and when you ask someone for money, it’s the ultimate test, so nothing beats that. I’d do that in a heartbeat, absolutely.

Andrew: All right, I want to get into how you got more sophisticated at communicating your message, I’m not going to even call it marketing, it’s about getting the message out there. But first I want to tell people out there, if you’re entrepreneurs, if you are an entrepreneur, the person listening to me, and you need a lawyer, everyone’s going to tell you that you should either talk to the local guy who your father knows, or their father knows, or, I see you rolling your eyes Jesse, or they’re going to say, go to the top firms. In fact, I have people here all the time, I’m in San Francisco, they go to the top firms, ask them, what do you pay, say I don’t know, but it doesn’t matter, it’s coming out of my investors’ pockets. We’re talking about tens of thousands of dollars. It doesn’t matter, right? It’s not their money.

If you’re comfortable throwing away other people’s money, there are lots of law firms that will take it. If you don’t care about the money and you just want someone who’s going to make mistakes for you, and you’ll deal with them later on, you can suffer by going to the local guy. But if you want someone who’s going to charge the right amount, even a low amount, and be there for you as you develop your company. Be there for you with the experience that comes from having helped many other entrepreneurs, the guy I’d recommend you talk to is Scott Edward Walker of Walker Corporate Law.

I couldn’t believe how low a price he gave a friend of mine who said he wanted to form a company, and he needed some protection for him and for his co-founder. We’re talking about just a little more than do-it-yourself cost, and Scott Edward Walker set the whole thing up for them.

And as a result, they now have a relationship with them that they’ll have for when it’s time for them to raise money. For when it’s time for them to buy companies or sell their company, or take their company public if fortunately they get to go that way. You need a lawyer who will help you get there. Go to Scott Edward Walker. Here’s his website: WalkerCorporateLaw.com.

Before I move on from this, do you have any advice for someone on the legal stand? Not for someone, but for entrepreneurs? Anything that you would advise them to watch out for or be prepared for?

Jesse: Honestly, I would just keep things simple. The longer term commitment that you make, the longer that term, the scarier it is. So, I try everything with compensation, all sorts of things that happen with a business now. I say I only commit to my wife for a long term. Everyone else?

Andrew: Yeah.

Jesse: Simple. So, that would be my totally from the hip advice.

Andrew: Human beings are awful, awful, at anticipating what the future will be.

Jesse: Yeah.

Andrew: They’re so bad at it. Okay. But we try to do it all the time. And then we end up spending money on things.

Jesse: Oh, absolutely. With rose-colored glasses on as well.

Andrew: Sorry?

Jesse: With rose-colored glasses on.

Andrew: Yes.

Jesse: We always view everything that will just be perfect.

Andrew: Right. You know what? I rented, in my past company, a floor of office space in midtown Manhattan. It cost me over a million dollars a year, easily over a million dollars a year, because even though we were a 40 or maybe a 20-person company at the time, I said I need to be prepared for when we get to be 150 people. We need the space. We didn’t get to 150 people.

Jesse: No.

Andrew: I ended up with that lease for years. It wasn’t until last year that I finally got to close out that lease.

Jesse: Awful.

Andrew: You did get better, coming back to your story, at telling your story, at sales. You actually got so good at it that you came up with a method for communicating, for selling, for writing copy. And you actually started teaching it. What’s the method that you learned early on?

Jesse: Yeah. I mentioned this kind of early. I just kind of blew past it a little bit. In February of ’05 I was sitting there with some spare time on my hands. The internship I was at, they said I’m unassigned. I said, ‘What does that mean?’ And they said it means look busy in your cube, you’re unassigned.

So I sat there with my laptop and decided I would rewrite our horrible sales copy. And through that rewrite process, just writing it again and again, I realized that I had this method built into the spreadsheet that I had never talked about. I didn’t know it was there. I had lived by it, and I knew that the spreadsheet worked, but I couldn’t have articulated exactly how. And so through that iteration of just writing copy over and over I just stumbled on those four rules.

Andrew: So it wasn’t rules for how to write copy. You discovered the rules for how to budget your money.

Jesse: Absolutely.

Andrew: And by teaching those, you were basically. Were you selling that method, or were you teaching it via email so that people would learn it, internalize it, and then buy software to do it?

Jesse: We would teach, I mean, I would teach it on the website. Give away all the education you want. Teach, teach, teach. And then, they would naturally say, “Well, these guys have a tool that complements their teaching perfectly.” And it’s a natural sell. It’s like Franklin Covey selling a planner after you’ve done a time management seminar. It’s an obvious sell.

Andrew: When you got someone to write your software for you, you’re not a developer. You struggled with macros. How do you manage someone who writes code for you when you can’t read code? When you’re not a project manager?

Jesse: I got lucky and found a really good person. Taylor, who’s now my CTO, he was great. He delivered what he said he would do. We iterated a lot. He wanted the product to be good even though he had no long-term interest. For him it was milestone payments. But he had a genuine desire to really make it good, and enjoyed his craft.

And you could tell that he loved his craft and loved it in a useful way. Not like in an over-optimization way. So, I got lucky, I’ll say. Now we hire for that, and we’re careful, but early on I knew that we clicked. I could tell. I hadn’t met him for long, I didn’t meet him for probably a year and a half from when we started working together, but we chatted on the phone for hours and hours. I hate to tell people that I got lucky. I wish I had some kind of magic tip, but I knew that he and I worked together, so we maintained that relationship.

Andrew: What about the milestones? One of the things that Hiten Shaw, founder of KISSmetrics told me was because he wasn’t out for himself, he would hire people to do small projects for them, see how he works with them, what kind of output they give him, and then based on that he knows whether they can work with them or not.

Jesse: Yeah, I mean, that’s basically what I did, because I did break up the projects into milestones and on the delivery date I would pay him and I would make sure that we had what we had. The nice thing, honestly, about this was that he was basically porting a spreadsheet, so for those people that are saying, “Well, [??] is all of this code,” having that spreadsheet that was fantastic field-tested prototype ended up being a great springboard for a developer to look at and say, “Oh, this is what I could do.” I’ve never thought about that until just now, but it was a great way to keep our scope under control.

Andrew: So what did the software do that the spreadsheet didn’t do?

Jesse: It had licensing, so I didn’t just e-mail spreadsheets out to everybody. It did some fancy things with scheduled transactions. The biggest thing it did was that it would import your OFX or QFX bank transactions that you would download, and that gave us-

Andrew: Ah, so you don’t have to enter it yourself. All of the data just gets automatically entered and what you as a person who needs a budget has to do is categorize it.

Jesse: Yeah, you categorize it. We would still make the person go to the bank, log in- I’m still for that for philosophical reasons- but it did cut down on the tedium for them. So the app, it was just more polished as well, it presented itself better, so there were many reasons. We sold it for, I think, 40 dollars originally, which was twice what the spreadsheet was, and it immediately outpaced the spreadsheet from day one.

Andrew: I can see that. Spreadsheet 1995, I’m now looking at early screenshots of it. Like you said, just a basic list of categories, current balance, then budget for the month, how much you really spent on the month and then what your balance is. Why, actually, do- what’s a current balance?

Jesse: A current balance would be- well, we’ll get into a little bit of my- this is [??], so it’s not entrepreneurs if it’s the money, but- you know, an entrepreneur will look at their checking account balance or their business balance and it’s this pile of money, and they have to constantly ask themselves, “Can I afford that? Can I afford this higher? Can I afford this marketing initiative? Can I afford this big lease on this big office space?” So all of these questions, “Can I afford that?” They have that information when that money’s just in a big pile.

And what our software does, or what you can do on a piece of paper, is break up that pile of money into meaningful objectives. Just like you have departments in a business, you have all of your money going off to different jobs, doing what it’s supposed to do. Once you see that, and you’re looking ahead and saying, “Hey, I’ve got something set aside for bonuses. I’ve got something set aside for testing out twitter.” Whatever those things are called now, [Lead] Cards. So all of these different experiments, whatever your objectives are, you see all of your money as objectives instead of just this globe pile.

And the entrepreneur suddenly feels very at peace, because they can answer the question, “Hey, can we afford this new thing?” So it’s really just a way of getting visibility on a big pile of money, most of all.

Andrew: I see. So every month I might have a grocery allowance, so to speak. Whatever I use gets pulled out of that, whatever I don’t use gets added back to my current balance for groceries, and the following month I had the allowance plus what I didn’t use the previous month. Got it. Got it! And I can see how this philosophy now plays itself out on the spreadsheet, and how it can play itself out in whatever comes in the future, where if there’s a chip that gets put in your mind, the philosophy is still there, the software and the hardware are just there to make the philosophy easier to implement.

Jesse: Absolutely.

Andrew: I see. And that’s why the e-mail course did so well. You were sending people an e-mail explaining this process to them, teaching them something they could do on their own, and by the way, if they wanted to, you also sold spreadsheet first, later software that would make it easier.

Jesse: Yeah, the e-mail, of course, doubled, maybe even tripled our sales. It was a big, big deal. And all I did in the course was teach, just teach that method, I didn’t mention software at all, and at the very end I said, “Hey, if you want to implement our software, Vericos. So it was a massive success. Still is a big success. People say e-mail is dead. It’s alive and well and valuable. So…

Andrew: I can see people still doing it today. I can’t believe I never heard your story before. If not for Brian Harris of Video Food, I never would have understood it. You’re not, I think, you’re just not in our world. You’re not on TechCrunch. Have you ever been on TechCrunch?

Jesse: I used to browse it a little bit, but I’ve just never been in that scene. I never saw myself as this entrepreneur and I have a vision and I am going to start this grand thing. It was always just kind of grinding it out. Yeah, so, I’ve just never been a part of it really. But, I’m enjoying it as I meet new people like yourself and like Jeremy. And I thought, there’s some great people around. I should probably branch out a little more.

Andrew: It’s an inspiring story, but it’s useful and I want to hear more about it. But, I want to make this point that I think one of the things I’ve noticed about the TechCrunchs of the world is they cover a certain kind of entrepreneur and a certain kind of startup. The people who have an interest in promoting themselves on those sites are either investors who want to say “Here, look this is where I put my money,” so that other entrepreneurs want to come to them.

Or it’s entrepreneurs who just raise money and need to say “Look, I just came out of nowhere, but I’m on TechCrunch. I got funded by this company. You can take me seriously.” The problem with that is that it doesn’t expose us to enough bootstrap entrepreneur like you who’s stories I think are more actionable, more relatable, more usable. You are still bootstrapped. Have you taken any money in?

Jesse: No, despite lots of invitations. It would… At the moment it doesn’t interest me at all.

Andrew: SCO is another thing that you did.

Jesse: Yeah.

Andrew: How did you learn search engine optimization?

Jesse: You know, title tags, meta tags, and a good solid H1 I suppose.

Andrew: So just learning the basics, the 20% that gets you the 80% results, and not obsessing about the last mile.

Jesse: No, and you know, we never obsess too much about it, but at the time, that is what I thought you did. If I were to go back and do it again, I would look a lot more at relationships and less at SCR. I would look at who are the influencers in my market and how can I have a relationship with them? I just kind of was of the grind it out mentality and SCO, I feel like, is a grinders game.

Andrew: Funny you should say that. I’m looking at where you are getting your traffic now. A big slice of your traffic comes from Lifehacker.

Jesse: Yeah.

Andrew: How?

Jesse: It was a while ago, but they wrote about us and said, “Hey, you should check out this app.” We noticed this big spike I think two days later, and realized what had happened. There was a competition where they said we’re the best personal finance app and we just bombed it. I mean, I told everybody, everyone. We have a pretty devoted fan base. I said guys, there’s this competition. We’ve got to get out the vote. And, so, of course, we beat out Mint and a million users.

I wrote, I think the guy’s name was Allen that wrote. I wrote Allen and said Allen you know I promoted this. This is not a real representation of the population. And he’s like “Oh no, this is great, this is great.” So, he was cool with us really getting out the vote like that. So, from that alone, we ended up getting quite a bit of traffic. They still just send us traffic all the time. It was a bit…

Andrew: I see that. I see. So if you were just software you wouldn’t have these fans who believed in your methodology who would respond to it.

Jesse: That’s right.

Andrew: I think if Mint emailed me now, and I like Mint. I think they’re a decent company. If they emailed me, I actually have a filter setup to automatically archive it…

Jesse: Oh dear.

Andrew: … because I don’t’ care. I’ll go to the site when I need to go to the site.

Jesse: Yeah.

Andrew: But here you have a fan base who’s willing to do it and I can see that on the site. Let me see what else. You also did a 75 percent off deal. They also do like a Groupon like deal on their site from time to time and it looks like you did that for a while.

Jesse: That was done through Steam and if you guys want the craziest of all crazy stories…

Andrew: Yeah, tell me that actually. I do see you do the budget. Steampower.com/app and then your app number. What are you doing with Steam? I thought that Steam was for games.

Jesse: It is for games. It might still be for games. Maybe budgeting is a game. I don’t know, but, we, a while back, early last year, one of our developers comes to us, named Ian, and he says, “Harry, we should get on Steam.” And I said what’s Steam? I’ve never heard of it. He said it’s this gaming platform. I said that’s a really bad idea. There’s no way that budgeting software will work on a gaming platform. He pushed it. I said go ahead and try. So, we got on there through Steam kind of going out to the community and saying hey vote.

And again we had our fan base and said hey guys vote for us and see if we can get in there. I think they let us in as 6th of 5 apps they were allowing. They saw that we had a good thought going and kind of made an exception for us. So we got onto Steam and then Valve, the company behind Steam, they have the craziest people that are on their platform.

And they did this 75% off sale, like a flash sale, and I was mortified at the idea of marking our software down that low. Because we don’t do sales. I priced it at what would be considered a premium price. And we’re comfortable there. And people see the value, again because of the method. But Valve says, “Trust us”, so we launched at 15 bucks and the gates just opened and money is flowing in and it was, I can’t remember the exact numbers, but I think Steam last year contributed close to or just over a million dollars in revenue.

Andrew: Wow.

Jesse: At $15 a pop, the side note to this that’s really important is that we saw zero uptick in support and we saw a lot of word of mouth, that these Steam users treat these flash sales like trials. So they’re saying, “I might need that in the future, I’ll pay 15 bucks.”

Andrew: Got it.

Jesse: So it’s a very interesting physiological thing that Valve does where we still see them and they’ve boosted our base and see them through our webinars and support but it wasn’t this big wave that we were kind of afraid of. So it’s been an insane little ride the last year but it was a big boom for us, helped us hire a lot.

Andrew: Am I wrong that now they’re selling it for $59.99?

Jesse: Yeah, $60’s the norm and most of the time they sell it at $60 and then every once in a while they …

Andrew: They flash sell it.

Jesse: … kind of tell us, ‘Hey, we’ll do this flash’ and we say okay or sometimes we say no, we’d rather not, because I mean frankly I don’t want to be a $15 app, so …

Andrew: You also work with slickdeals.net. Is that from them?

Jesse: Yeah, that kind of just of just bleed out into everything.

Andrew: I see, when they promote, they just promote everywhere. Referral Candy. You guys to referrals?

Jesse: Yeah, about 30% of our sales are from our own customers just telling people about it.

Andrew: So it’s not affiliates, it’s your own customers?

Jesse: Well, it’s our own customers through that. Yeah, they get six bucks and their referee gets six bucks so it’s kind of a neat little even trade.

Andrew: Got it. So you’re building this thing up. How many employees are working at the company now?

Jesse: I think we have 26 now. We’re hiring three more, no four more, by the end of July hopefully if we can find the right people. So it’s growing. You know, it’s crazy. Just one at a time, but it’s, I don’t know what to tell you, I’m just learning as I go, you know.

Andrew: Where are you learning from?

Jesse: I read. I’m not a drive-by information guy, so I’m not a big reader on the blogs. But I do like to read the long form stuff. I like to read a good book. Right now I’m reading a book called Made to Stick, which I hardily recommend. And I read a lot in the psychology area. There’s a book I’ve got on my desk here called Break Through Advertising. It’s from I think 1930 something.

Andrew: Yep.

Jesse: It’s about copyright and copyrighting and so the long stuff, the stuff that really makes you sit down and think and have to maybe shut down your computer, that’s the kind of stuff I like to read.

Andrew: I should say to anyone out there who hasn’t gotten Break Through Advertising, first of all it comes highly recommended by real entrepreneurs not the want to be ones who are reading the latest book of fantasy about business but the other thing is that it’s available free, I think through the Gutenberg Project at this point, so if you’re curious …

Jesse: Aw, you shouldn’t have told me that, Andrew because I think I paid like 80 bucks for mine …

Andrew: Yeah, that’s the weird thing, on Amazon you have to pay $80, if your lucky hundreds otherwise, or you can just go online and et it and get the pdf of it or the txt file. I’m just so obsessed with how you guys are getting traffic in the door. It’s a really clever operation. I mean, frankly, how many people type in YNAB vs Mint? It comes up all the time, right? They see your product, they say you need a budget, how does it compare to Mint because it’s a big company out there, they type it into Google and boom, they end up with an article on your site where you compare the two, where you say, ‘Look, I know you guys are curious, so I’ll explain it.’

Jesse: Yeah, it’s a little bit tongue in cheek. You know, we’re out to fire a few shots over the bow of Mint because they’re so big and we’re so small, but that article, I just noticed the traffic was coming in and I thought OK, we need to answer to this question. So it’s a good sign for us. We look at branded traffic over time and it’s a good sign for just what kind of penetration we have, what kind of word of mouth we have that maybe isn’t trackable through referral candy or something more discreet like that, you just look at your overall, you know YNAB is a unique acronym, so when someone’s typing that in, we’re confident they’ve heard about us somehow. I look at that pretty close, I like to see that climb over time.

Andrew: Hi, I see that. YNABversment is one of the top search terms that leads people to you. It’s not huge on its own, but, it’s popular.

Jesse: Yeah.

Andrew: You should talk about one of the set-backs. One of the set-backs happened to you in 2009, you decided that you were going to create a Mac and Windows version of the software and what happened at that point?

Jesse: The back story that’s really important to this, is that Taylor, who had built my original app, he had been moonlighting the whole time and he was my number one guy and then he had other issues, he couldn’t really devote time to it, so, I had to find a new developer and he was going to build it in Java because that would allow us to deploy.

I’ve never seen a good desktop application written in Java, then or now. I don’t even know if it’s called Java or JavaScript, whatever it is, you can see it from a mile away when you load it up. It didn’t work out. I’d poured in tons of money, tons of time; I think I ended up being in for sixty-five grand on it.

Andrew: Wow.

Jesse: It was of my own money, obviously. Taylor came on board finally, full-time just after we had wrapped up that project. So, Taylor coming on was basically, him being able to put a bow on it and launch it out the door and we finally have a solution for Mac users and they had been pounding the pavement telling us, “hey you got to get this out for us”.

So you got these customers that are antsy, Taylor comes on and says, “this is awful”, and he just said, “Jesse, we can’t release this”, and we’re talking done, like we’re going to go to beta scenario, you know. He just said we can’t release this it’ll tarnish our reputation and so we didn’t. I probably still have the codes somewhere on my machine but, it’s just there gathering dust.

Andrew: Okay, $65,000 for other developers to develop it for you because, you’re using outsourcers, the thing is done, Taylor’s full-time, Taylor just needs to essentially launch it and he’s telling you “I don’t think we should do this, it is going to hurt our reputation”, and you have a decision to make, and you decide to pull it out and on a personal level, you’ve finally gotten that house that you promised your wife earlier, which you put off, how did it feel to have him now full-time, with the expense you have and the responsibility of having an employee, software that’s not launching, and a house that you have to make the mortgage payments for?

Jesse: The house, I wasn’t worried about the mortgage payment, because my classic style was that I wasn’t too extended there, but the money, just loosing that money was painful because you’re talking to a guy who optimizes his light switches being on and off, you know, so, it was painful.

Andrew: What do you mean by optimizing light switches being on and off?

Jesse: I just can’t stand if they’re on and no ones in the room, it drives me crazy.

Andrew: I see, even that little bit of a waste is too much for you.

Jesse: It’s irrational and I should probably see help for it, but it’s just how I was wired so sixty five grand, it might as well have been a million dollars and I went home, our house is empty, new and big and it’s echo-y in there because there’s no furniture and I go home and tell Julie that we can’t launch the software and she’s like, what does that mean, and I kind of catch her up on everything that’s going on and so she succinctly said, “so you mean that’s where all my furniture went” and I said, “yes, you could put it that way”. We could have furnished the house, but, we had to wait. As usual, she just waited and now the house we have furniture in it, you can sit on the couch and things, it’s pretty fancy.

Andrew: Let me get people a follow-up and then I want to ask you a few personal questions, including revenue and maybe some of the things that have nothing to do with business but are still very important for business. The follow-up is, if you’ve been listening to this interview and you see the power of minimum viable products, I urge you to listen to my interview, don’t even bother reading it, just listen to my interview with Eric Ries, it’s one of the first one’s that he did, back when he was talking about the lean start-up concept and the way he explained it and the process that he broke down in that interview.

I think it’s one of the best that I’ve ever done and it’s really worth listening to as a follow-up for this interview, if you’re saying what do I do with everything that I’ve heard here about product creation. The other thing that I urge you to do is, learn a little bit about content marketing. I know that when we’re in software we think of content guys as being those people who don’t really create stuff they just talk or type but, as you can see from this interview, content creation helps you promote your product, but also helps your product stand for something more than just code.

So if you’re interested in doing that there’s a course that I actually did with Leo of Buffer App. If you know anything about their success you see that they’re just blowing up. How do they get all their customers? Largely through content marketing that you’ve noticed everywhere on the Internet. Leo breaks his process down. He’s a very systematic person. He talks about it.

Finally, I would really do you a disservice if I didn’t tell you that if you’re looking to get traffic one of the best people to study from, whether it’s on Mixergy or anywhere else, is Neil Patel. He’s an old friend of mine, and I asked him to come on here. I see, Jesse, you’re nodding.

He’s a brilliant guy when it comes to traffic. He’s obsessed about it forever. I said would you please come and teach my premium members how they can get traffic. Really break it down from the simplistic – what can we do tomorrow – to the more advanced which is what do we if we’re already experts at this and have followed Neil Patel, what do we do to get another burst of traffic, take it to the next level. Neil Patel broke that down.

So you have all those courses and interviews and so many others available to you if you want access to everything. Not just the transcripts. Not just the latest interviews. Those, too, are available to everyone. But, if you want to go deeper and get the courses, get those older interviews, get so much more, I urge you to sign up for Mixergy Premium. I guarantee you’ll love it. If you don’t love it, if it doesn’t transform your business, I’ll give you your money back.

But, if you want to check it out it’s available to you at mixergypremium.com, mixergypremium.com. At least you should sign up and immediately go and check out what Neil Patel has to say. The guy’s fricking brilliant, and I’m lucky to have him as a friend. Getting to the personal stuff. First of all, revenue. What did you guys do 2013?

Jesse: Just over four million in revenue. I think it was 4.2.

Andrew: Unbelievable.

Jesse: Yeah.

Andrew: How did you not become a jerk? You should be a jerk already.

Jesse: It just… Yeah, maybe tomorrow. I don’t know. It’ll happen. Just get a little more money.

Andrew: It’s got to be fun. Congratulations on that. And, one of the reasons why you do it, I imagine, tell me if I’m wrong, is you’re an early riser. What time do you wake up?

Jesse: Four-thirty.

Andrew: Four-thirty.

Jesse: Yeah.

Andrew: How do you get up at 4:30? Does that mean that you have to go to sleep at 6:00 p.m.?

Andrew: That’s an easy thing to do when you’re a single guy. But, when you’re a family guy, when you have a wife, when you have kids, how do you explain to them look I’m going to sleep early?

Jesse: You’ve got to put them to bed before you go to bed.

Andrew: I see.

Jesse: The kids are on a schedule. I’ve got five kids, so everything’s got to be a schedule. Yeah, they’re in bed by… If they do well and they’re done with all their bedtime stuff by 7:30, 7:45, we read together, read them a book. Then, 8:00 they get to read from their half hour on their own. Then, lights out.

Andrew: Oh, wow. How old’s your oldest?

Jesse: He’ll be ten pretty soon.

Andrew: Got you. I just had a baby about a month ago.

Jesse: Congrats.

Andrew: I used to get up really early. I would be up by 6:15 doing work. I can’t do it right now. It’s…

Jesse: Well, hey, with a one month old, all bets are off. You’re just surviving.

Andrew: Yes. But it’s encouraging to see that I can get my schedule back on track at some point soon.

Jesse: Yeah, you’ll get it back.

Andrew: What do you do when you’re up at 4:30 in the morning? When most people who are listening to this and most wantrepreneurs are dead asleep and dreaming of what they want to do, you’re up there working. What do you do in that time?

Jesse: I hit emails hard. I’m done in ten minutes or so with emails. Then, I do ten minutes of the getting things done process. I work through my to do list. I prioritize it. Then, I hit the gym.

Andrew: How do you get through email in ten minutes?

Jesse: It’s not a lot of email.

Andrew: I see.

Jesse: I kind of violently avoid email. People know not to copy me on tons of stuff. I don’t respond right away, which kind of starts to cut down on it as well.

Andrew: I see. If people see that you’re using it as chat they’re going to keep emailing you and waiting for the response…

Jesse: Yeah.

Andrew: …and emailing you and waiting. I see. All right.

You didn’t… Usually I start out. Before I even start recording, I ask what do I do to make this interview useful for you. You didn’t say to me Andrew, we have jobs, which is what a lot of entrepreneurs do, could you please direct people to this page so that we can maybe help fill those positions.

I don’t even know if you want me to do this, but I want to do it anyway. I like the way you build your business. I like the way you run your company and the kind of person that you are. I would love for someone in my audience to go work for you and get to be essentially mentored by you.

Where can they go and look? Should I just be looking at, like, youneedabudget.com/jobs? Where do we get to see this?

Jesse: We’re using a company called Recruiterbox. So, if you went to ynab.recruiterbox.com you could see we’re looking for a really good Postgres developer. Then, we’re closing the loop on our designer and marketer. So, really, that developer position, we would love to have somebody that’s… They should read our manifesto, make sure they fit in. But, we’d love to have them.

Andrew: Yeah. I mean how could you not go work for a guy who, when I look back, 2005 categories of spending, number one tithing…

Jesse: Yeah.

Andrew: …number two, charity. All right.

Jesse: That was not a mistake, but I just didn’t even think about it at the time, of course, and I just launched. Then I got people saying hey, I think it’s cool you have tithing at the top; which for me, personally, I do. I thought well maybe I’ll leave it in. When you give money away it kind of asserts your authority over it, so I think it’s good for everyone to give it away on occasion.

Andrew: Well, congratulations on your success. Thank you so much for doing this. If you got anything of value, well, do not email Jesse. But, I do hope that someone out there will get to see him at a conference or somewhere else and say thank you.

I’m going to do it right now. Thank you so much for doing this interview.

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Hey Jesse and Andrew, this was a great listen and a really inspiring story. I found the “budget theory” really interesting because I implemented something similar recently using prepaid credit cards… So each week our budget for each major expense goes on there and we just spend out of those but it automatically handles the issue of “rolling over” money you didn’t spend out of last week’s budget. It wasn’t until after I did this that someone told me the term “envelope accounting” :)

The “document style” MVP was also a really interesting story and particularly relevant to me right now beuse I’m launching a similar type of thing that’s just a pre-configured MediaWiki install for helping document your business. Having your entire playbook laid out here was really invaluable. Thanks so much for sharing.

YES! Love the distinction you make here that bootstrapped entrepreneurs are under-covered. The ironic part is, a lot of those bootstrappers are BUILDING BUSINESSES while others are often trying to raise money. Good for you, Jesse, for “grinding it out,” rather than focusing on being part of that TechCrunch world. Awesome, awesome.

Peyton . true that Jessica `s blurb is shocking, last
monday I got a gorgeous Peugeot 205 GTi after having earned $6860 this past 4
weeks an would you believe ten-k this past-month . with-out a doubt this is the
easiest-job I’ve ever had . I actually started six months/ago and pretty much
immediately started to bring in minimum $84… p/h . Read More Here F­i­s­c­a­l­p­o­s­t­.­C­O­M­